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by Adrian Mastracci
Business in Vancouver
Podium Column
November 6-12, 2001 Issue
The proven approach to create, grow and retain your wealth is with
the long-term investment perspective. Perhaps, the 2001 year-end
review is an excellent time to initiate appropriate changes.
Here are ten suggestions to enhance your nest egg:
1. Review your investment plan
Take the time to review your investment game plan, which contains
all the policies and strategies you will follow to reach your chosen
destination.
2. Focus on asset allocation
Forget market timing and stock selection. Long-term asset allocation
decisions have the greatest impact on your portfolio returns. Asset
allocation means choosing asset classes, such as cash, bonds, and
equities, and choosing the mix, such as large companies versus smaller
companies in your portfolio.
3. Pay yourself first
Discipline yourself to a savings program that you can stay with
over time and don't get in over your head with debt, especially
consumer debt. Allocate a portion of your earnings to savings on
a regular basis, perhaps by automatic deposit. Aim for 5% to 10%.
4. Tax loss selling
If you entertain tax loss selling, don't just sell something to
realize a loss. Act in context of your overall portfolio and how
the individual security fits your investment plan.
5. RRSP deposits
Don't wait until the end of February 2002 to make your RRSP deposits
for 2001 and for unused RRSP contribution room from prior years.
Even if you don't want to take the deduction in 2001, at least the
money will begin to compound earlier. You can ask your employer
to send your last one or two paychecks in 2001 directly to your
RRSP. You can usually send the full amount to the RRSP, without
deductions, which in effect gives you the tax refund now.
6. Young and 69 in 2001
Those youngsters turning age 69 in 2001 must convert their RRSP
into a RRIF not later than December 31. The eligible investments
for a RRIF are the same as the RRSP. Hence, investment strategy
need not change if it's appropriate, with the exception that you
will be withdrawing a minimum annual sum, perhaps more.
7. RESP deposits
You may contribute for 2001 to a Registered Educational Savings
Plan for a child not later than December 31. The annual maximum
is $4,000 per child, to a lifetime maximum of $42,000. Keep in mind
that the RESP deposits are not deductible for tax purposes. The
federal government will also assist the RESP with a grant of up
to $400 per child deposited into the plan.
8. Bonus deferral
Those fortunate to be receiving a bonus in the near future, may
ask the employer to consider deferring its payment to you until
January 2002. That will defer the income tax on the bonus for another
year and you may be taxed at a lower rate.
9. Deductions and tax credits
Review your situation to ensure that you claim all amounts paid
in calendar 2001 for expenses incurred. Some of the outlays will
result in tax credits on your 2001 income tax return. Hence, review
tuition paid, political contributions, charitable donations and
medical expenses so that you can take advantage of the applicable
credits.
10. Business owners
If your business employs family members, consider paying their salaries
before the end of 2001. This will provide them with CPP contributions
for 2001 along with RRSP room for 2002. If you give gifts to employees
worth up to $500 per year, the gift is not taxable to the employee
and you can deduct the cost.
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